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Don't overlook the non-tax benefits of different states too! I went with a Nevada trust not just for tax reasons but also because they have stronger asset protection laws and longer perpetuities periods (basically how long the trust can last). Delaware has excellent trust laws but still has some state taxes in certain situations. South Dakota combines zero state income tax with excellent asset protection. Alaska allows self-settled asset protection trusts if that's important to you. Really depends what's most important for your situation - tax savings, creditor protection, privacy, or flexibility for future generations.
Are there any gotchas with these out-of-state trusts? Like do you need to visit that state regularly or have some connection to it? Just trying to understand if there are hidden downsides.
Yes, there are definitely some potential "gotchas" to be aware of. First, you'll need some legitimate connection to the state - typically this means having a trustee (individual or corporate) who resides in or has a significant presence in that state. Simply naming a friend who lives there isn't usually sufficient. The second big consideration is ongoing administration costs. Out-of-state trusts often require hiring a professional trustee or trust company in that state, which can cost anywhere from $2,500-$8,000 annually depending on the complexity and trust assets. For smaller trusts, these fees might outweigh the tax benefits.
Has anyone compared the costs of setting up trusts in different states? I got a quote from my attorney for a basic revocable living trust in my home state (Illinois) for $2,800, but when I asked about creating it in Nevada, the price jumped to $4,500 plus ongoing fees for a Nevada trustee.
I did some shopping around for a South Dakota trust last year. Initial setup with a decent trust attorney was about $5k, then annual trustee fees with a SD trust company were $3k. But I was putting significant assets in it ($3M+) so the math worked out in the long run. Probably not worth it for smaller estates.
Don't overthink the tax stuff when you're just starting out with Doordash. I've been dashing for 3 years and here's what I do: - Track mileage with the free Stride app - Set aside 25% of earnings in a separate savings account - Keep receipts for hot bags, phone mounts, etc - Use TurboSelf-Employed at tax time (it's worth the extra cost) The standard mileage deduction (58.5 cents per mile in 2022) usually wipes out a big chunk of your taxable income anyway. Just remember that miles to your first pickup location and home from your last dropoff don't count - only miles while actively on order.
Thanks for breaking it down like this! Do you just take photos of receipts or do you organize them somehow? And does the 25% you set aside usually cover everything you end up owing?
I use a simple folder in Google Drive for receipt photos - just snap a pic and upload it right away before I lose them. I have subfolders for each quarter to make it easier at tax time. The 25% has been enough to cover my taxes each year, but it does depend on your overall income situation. I'm single with no other income sources, so it works for me. If you have other jobs or income, you might need to adjust that percentage. I actually ended up with a small refund last year because the mileage deduction was so significant. Just make sure you're religious about tracking every mile - those deductions add up fast!
Is anyone else noticing that Doordash's in-app mileage tracker is WAY off from actual miles driven? I swear it's undercounting by at least 30% compared to my car's odometer readings.
Have you tried looking at FreeTaxUSA's help articles? They have a whole section dedicated to self-employment and 1099 income. I found it super helpful last year when I was filing as a freelancer for the first time. Just click the question mark icons throughout the software or search their knowledge base.
I tried looking at their help articles but they're not very detailed about my specific situation with multiple 1099s. Did you have multiple income sources? Also, did you find their interface for business expenses intuitive?
I had three different 1099s last year from different clients. Their help articles on combining multiple 1099 forms on Schedule C were really helpful. You just need to enter each 1099 separately, and the software combines them correctly. For business expenses, I wouldn't call it super intuitive, but it's organized by categories that match the Schedule C form. The trick is to pre-categorize your expenses before you start (office supplies, software, equipment, etc.). Make a spreadsheet first with everything sorted, then the data entry goes much faster.
FreeTaxUSA has been my go-to for years and I'm a freelancer too. One tip - don't overthink the business expenses. Just create general categories like "office supplies" ($345), "software subscriptions" ($1,290), etc. You don't need to enter every single receipt unless you want to. For quarterly taxes, after you finish this year's return, it will generate vouchers with suggested payment amounts. Just make sure to calendar the due dates (April 15, June 15, Sept 15, Jan 15). I set reminders on my phone 2 weeks before each one.
Do you pay the quarterly estimates online or mail in the vouchers? I've been confused about which is better.
My wifes an accountant and she said that you can claim the portion of ur registration that is based on the cars VALUE as part of the state and local tax deduction... but only if you itemize. if your taking standard deduction then no you cant deduct it at all sorry man. Standard deductoin for 2023 is: -$13,850 (single) -$27,700 (married) -$20,800 (head of household) If all your itemized deductions dont add up to MORE than your standard deduction amount, then just take the standard and forget about the vehicle registratin.
NebulaNinja
Just a quick tip from experience: make sure to get a qualified appraisal of your property value at the time of conversion from rental to personal use. I didn't do this when I converted my rental in 2018, and it became a major headache during my 2022 sale. The IRS questioned my stated value during an audit, and I had nothing concrete to back it up. I ended up having to hire a real estate expert to retroactively analyze what the property would have been worth, which cost me over $2,000 plus a lot of stress. Even with that, I still had to compromise on the value with the IRS auditor. Document everything at the time of conversion!
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Fatima Al-Suwaidi
ā¢Is there a specific form for documenting the fair market value at conversion? Or is it just something you keep in your records in case of audit?
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NebulaNinja
ā¢There's no specific IRS form for documenting the FMV at conversion. The key is having strong substantiation in your records. Ideally, you'd get a formal appraisal at the time of conversion and keep that with your tax records. If you didn't get an appraisal, gather whatever evidence you can - comparable sales listings from around your conversion date, property tax assessments, insurance valuations, or even photos showing the condition of the property. The goal is having documentation created at or near the time of conversion, not something produced years later when you're selling.
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Dylan Mitchell
Has anyone dealt with reporting unallowed passive activity losses that span multiple years? I've got about $29k in passive losses from my rental property spread across 6 different tax years. When selling, do I lump them all together on one form or need to itemize by year?
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Sofia Morales
ā¢You'll report the total accumulated unallowed passive losses on Form 8582 in the year of sale. You don't need to itemize by individual years on your tax forms. However, you should have worksheets from your prior year returns that tracked these losses year by year. Keep those in your records in case of audit.
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